SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549
                             ----------------------

                                    FORM 10-Q
                     QUARTERLY REPORT PURSUANT TO SECTION 13
                 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

                For the quarterly period ended March 26, 2004

                     MERRILL LYNCH PREFERRED CAPITAL TRUST III
       (Exact name of Registrant as specified in its certificate of trust)

                         COMMISSION FILE NO.: 1-7182-06

       Delaware                                          13-7139561
(State or other jurisdiction of             (I.R.S. Employer Identification No.)
incorporation or organization)

  4 World Financial Center
     New York, New York                                   10080
(Address of principal executive offices)               (Zip Code)

Registrant's telephone number, including area code: (212) 449-1000


                     MERRILL LYNCH PREFERRED FUNDING III, L.P.
                  (Exact name of Registrant as specified in its
                      certificate of limited partnership)

                         COMMISSION FILE NO.: 1-7182-05

          Delaware                                     13-3982448
(State or other jurisdiction of             (I.R.S. Employer Identification No.)
incorporation or organization)

   4 World Financial Center
      New York, New York                                     10080
(Address of principal executive offices)                   (Zip Code)

 Registrant's telephone number, including area code: (212) 449-1000

The Registrants meet the conditions set forth in General Instruction H (1)(a)
and (b) of Form 10-Q and are therefore filing this form with the reduced
disclosure format.

Indicate by check mark whether the Registrants (1) have filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
Registrants were required to file such reports), and (2) have been subject to
such filing requirements for the past 90 days. Yes |X| No |_|

Indicate by check mark whether the Registrant is an accelerated filer (as
defined in Rule 12b-2 of the Exchange Act).  Yes [ ] No [X]

As of May 6, 2004 no voting stock was held by non-affiliates of the
Registrants.
================================================================================
<PAGE>

                         PART I - FINANCIAL INFORMATION
                         ------------------------------

ITEM 1.   FINANCIAL STATEMENTS
          --------------------
<TABLE>
<CAPTION>

MERRILL LYNCH PREFERRED CAPITAL TRUST III
CONDENSED BALANCE SHEETS (unaudited)
(dollars in thousands, except per security amounts)
-----------------------------------------------------------------------------------------------------------------------



                                                                                      March 26, 2004  December 26, 2003
                                                                                      --------------  -----------------
<S>                                                                                   <C>             <C>
ASSETS

Investment in partnership preferred securities                                            $  773,196         $  773,196
Interest receivable from affiliates                                                           13,531             13,531
                                                                                          ----------         ----------
Total Assets                                                                              $  786,727         $  786,727
                                                                                          ==========         ==========

LIABILITY AND STOCKHOLDERS' EQUITY

Distributions payable                                                                     $   13,531         $   13,531
                                                                                          ----------         ----------
Stockholders' equity:

   Preferred securities (7% Trust Originated Preferred Securities; 30,000,000
      authorized, issued, and outstanding; $25 liquidation
      amount per security)                                                                   750,000            750,000

   Common securities (7% Trust Common Securities;
      927,840 authorized, issued, and outstanding;
      $25 liquidation amount per security)                                                    23,196             23,196
                                                                                          ----------         ----------
   Total Stockholders' equity                                                                773,196            773,196
                                                                                          ----------         ----------

Total Liability and Stockholders' Equity                                                  $  786,727         $  786,727
                                                                                          ==========         ==========
</TABLE>

See Note to Condensed Financial Statements

                                        2
<PAGE>

<TABLE>
<CAPTION>

MERRILL LYNCH PREFERRED CAPITAL TRUST III
CONDENSED STATEMENTS OF EARNINGS  (unaudited)
(dollars in thousands)
--------------------------------------------------------------------------------------------------------------------------

                                                                               FOR THE THREE MONTHS ENDED
                                                                         -----------------------------------

                                                                         March 26, 2004       March 28, 2003
                                                                         --------------       --------------
<S>                                                                      <C>                  <C>
EARNINGS

Income on partnership preferred securities                                    $  13,531            $  13,531
                                                                              =========            =========





</TABLE>

See Note to Condensed Financial Statements


                                        3
<PAGE>

<TABLE>
<CAPTION>

MERRILL LYNCH PREFERRED CAPITAL TRUST III
CONDENSED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY  (unaudited)
(dollars in thousands)
---------------------------------------------------------------------------------------------------------

                                                                   FOR THE THREE MONTHS ENDED
                                                              -----------------------------------

                                                              March 26, 2004       March 28, 2003
                                                              --------------       --------------
<S>                                                           <C>                  <C>
PREFERRED SECURITIES

Balance, beginning and end of period                              $  750,000           $  750,000
                                                                  ----------           ----------

COMMON SECURITIES

Balance, beginning and end of period                                  23,196               23,196
                                                                  ----------           ----------

UNDISTRIBUTED EARNINGS

Balance, beginning of period                                               -                    -
Earnings                                                              13,531               13,531
Distributions payable                                                (13,531)             (13,531)
                                                                  ----------           ----------
Balance, end of period                                                     -                    -
                                                                  ----------           ----------


Total Stockholders' Equity                                        $  773,196           $  773,196
                                                                  ==========           ==========
</TABLE>

See Note to Condensed Financial Statements

                                        4
<PAGE>

<TABLE>
<CAPTION>

MERRILL LYNCH PREFERRED CAPITAL TRUST III
CONDENSED STATEMENTS OF CASH FLOWS  (unaudited)
(dollars in thousands)
-----------------------------------------------------------------------------------------------------------------------------

                                                                                     FOR THE THREE MONTHS ENDED
                                                                                -----------------------------------

                                                                                March 26, 2004       March 28, 2003
                                                                                --------------       --------------
<S>                                                                             <C>                  <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
   Earnings                                                                           $ 13,531          $    13,531
                                                                                      --------            ---------
      Cash provided by operating activities                                             13,531               13,531
                                                                                      --------            ---------

CASH FLOWS FROM FINANCING ACTIVITIES:
   Distributions                                                                       (13,531)             (13,531)
                                                                                      --------            ---------
      Cash used for financing activities                                               (13,531)             (13,531)
                                                                                      --------            ---------

NET CHANGE IN CASH                                                                           -                    -

CASH, BEGINNING OF PERIOD                                                                    -                    -
                                                                                      --------            ---------
CASH, END OF PERIOD                                                                   $      -            $       -
                                                                                      ========            =========



SUPPLEMENTAL DISCLOSURE OF CASH FLOWS:

Preferred and common distributions of $13,125 and $406, respectively, were
accrued at March 26, 2004 and March 28, 2003.

</TABLE>

See Note to Condensed Financial Statements

                                        5
<PAGE>



MERRILL LYNCH PREFERRED CAPITAL TRUST III
NOTE TO CONDENSED FINANCIAL STATEMENTS  (unaudited)
March 26, 2004
-------------------------------------------------------------------------------


BASIS OF PRESENTATION

These unaudited condensed financial statements should be read in conjunction
with the audited financial statements included in the Annual Report on Form 10-K
of Merrill Lynch Preferred Capital Trust III (the "Trust") for the year ended
December 26, 2003. The December 26, 2003 balance sheet information was derived
from the audited financial statements. The interim financial statements for the
three-month periods are unaudited; however, in the opinion of the
Regular Trustee of the Trust, all adjustments, consisting only of normal
recurring accruals necessary for a fair statement of the results of operations,
have been included.

INVESTMENTS

The Trust's investment in Merrill Lynch Preferred Funding III, L.P. (the
"Partnership") Preferred Securities represents a limited partnership interest in
the Partnership and is recorded at cost. At quarter end, the fair value of the
investment approximates its carrying value. Income on the Partnership Preferred
Securities is accrued when earned.

                                        6
<PAGE>

<TABLE>
<CAPTION>

MERRILL LYNCH PREFERRED FUNDING III, L.P.
CONDENSED BALANCE SHEETS  (unaudited)
(dollars in thousands)
-----------------------------------------------------------------------------------------------------------------------



                                                                              March 26, 2004   December 26, 2003
                                                                              --------------   -----------------
<S>                                                                           <C>              <C>
ASSETS

Cash                                                                              $        -         $        -
                                                                                  ----------          ----------
Investments:
   Affiliate debentures                                                              900,546             900,546
   U.S. Government and agencies                                                        9,123               9,105
                                                                                  ----------          ----------
   Total investments                                                                 909,669             909,651

Interest receivable from affiliates                                                   15,760              15,760
                                                                                  ----------          ----------
Total Assets                                                                      $  925,429          $  925,411
                                                                                  ==========          ==========

LIABILITY AND PARTNERS' CAPITAL

Distributions payable                                                             $   15,760          $   15,760
                                                                                  ----------          ----------
Partners' capital:
   Limited partnership interest                                                      773,196             773,196
   General partnership interest                                                      136,473             136,455
                                                                                  ----------          ----------
   Total partners' capital                                                           909,669             909,651
                                                                                  ----------          ----------

Total Liability and Partners' Capital                                             $  925,429         $  925,411
                                                                                  ==========          ==========
</TABLE>

See Note to Condensed Financial Statements

                                        7
<PAGE>

<TABLE>
<CAPTION>


MERRILL LYNCH PREFERRED FUNDING III, L.P.
STATEMENTS OF EARNINGS  (unaudited)
(dollars in thousands)
-----------------------------------------------------------------------------------------------


                                                                 FOR THE THREE MONTHS ENDED
                                                            -----------------------------------

                                                            March 26, 2004       March 28, 2003
                                                            --------------       --------------
<S>                                                         <C>                  <C>
EARNINGS

Interest income:
   Affiliate debentures                                         $   15,760           $   15,760
   U.S. Government and agencies                                         18                   34
                                                                ----------           ----------
Earnings                                                        $   15,778           $   15,794
                                                                ==========           ==========






</TABLE>

See Note to Condensed Financial Statements


                                        8
<PAGE>
<TABLE>
MERRILL LYNCH PREFERRED FUNDING III, L.P.
CONDENSED STATEMENTS OF CHANGES IN PARTNERS' CAPITAL  (unaudited)
(dollars in thousands)
------------------------------------------------------------------------------------------------


                                                                  FOR THE THREE MONTHS ENDED
                                                             -----------------------------------

                                                             March 26, 2004       March 28, 2003
                                                             --------------       --------------
<S>                                                          <C>                  <C>
LIMITED PARTNER'S CAPITAL

Balance, beginning of period                                     $  773,196           $  773,196
Net income allocated to limited partner                              13,531               13,531
Distributions payable                                               (13,531)             (13,531)
                                                                 ----------           ----------
Balance, end of period                                              773,196              773,196
                                                                 ----------           ----------


GENERAL PARTNER'S CAPITAL

Balance, beginning of period                                        136,455              136,497
Net income allocated to general partner                               2,247                2,262
Distributions                                                             -                  (76)
Distributions payable                                                (2,229)              (2,229)
                                                                 ----------           ----------
Balance, end of period                                              136,473              136,454
                                                                 ----------           ----------

TOTAL PARTNERS' CAPITAL                                          $  909,669           $  909,650
                                                                 ==========           ==========
</TABLE>

See Note to Condensed Financial Statements

                                        9
<PAGE>


<TABLE>
<CAPTION>

MERRILL LYNCH PREFERRED FUNDING III, L.P.
CONDENSED STATEMENTS OF CASH FLOWS  (unaudited)
(dollars in thousands)
-------------------------------------------------------------------------------------------------------------------


                                                                                     FOR THE THREE MONTHS ENDED
                                                                                -----------------------------------

                                                                                March 26, 2004       March 28, 2003
                                                                                --------------       --------------

<S>                                                                             <C>                  <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
   Earnings                                                                          $  15,778            $  15,794
   Accretion of U.S. Government and agencies                                               (18)                 (34)
                                                                                     ---------            ---------
      Cash provided by operating activities                                             15,760               15,760
                                                                                     ---------            ---------

CASH FLOWS FROM INVESTING ACTIVITIES:
   Purchases of investment securities                                                        -               (9,096)
   Maturities of investment securities                                                       -                9,172
                                                                                     ---------            ---------
      Cash provided by investing activities                                                  -                   76
                                                                                     ---------            ---------

CASH FLOWS FROM FINANCING ACTIVITIES:
   Distributions to limited partner                                                    (13,531)             (13,531)
   Distributions to general partner                                                     (2,229)              (2,305)
                                                                                     ---------             ---------
      Cash used for financing activities                                               (15,760)             (15,836)
                                                                                     ---------            ---------

NET CHANGE IN CASH                                                                           -                    -

CASH, BEGINNING OF PERIOD                                                                    -                    -
                                                                                     ---------            ---------
CASH, END OF PERIOD                                                                  $       -            $       -
                                                                                     =========            =========



SUPPLEMENTAL DISCLOSURE OF CASH FLOWS:

Distributions of $15,760 were accrued at March 26, 2004
and March 28, 2003.

</TABLE>

See Note to Condensed Financial Statements

                                       10
<PAGE>


MERRILL LYNCH PREFERRED FUNDING III, L.P.
NOTE TO CONDENSED FINANCIAL STATEMENTS  (unaudited)
March 26, 2004
--------------------------------------------------------------------------------



BASIS OF PRESENTATION

These unaudited condensed financial statements should be read in conjunction
with the audited financial statements included in the Annual Report on Form 10-K
of Merrill Lynch Preferred Funding III, L.P. (the "Partnership") for the year
ended December 26, 2003. The December 26, 2003 balance sheet information was
derived from the audited financial statements. The interim financial statements
for the three-month periods are unaudited; however, in the opinion of
the General Partner of the Partnership, all adjustments, consisting only of
normal recurring accruals necessary for a fair statement of the results of
operations, have been included.

INVESTMENTS

The Partnership's investment in affiliate debentures is recorded at cost, and
its investment in U.S. Government and agencies is classified as available
-for-sale and recorded at accreted cost, which approximate fair value.

                                       11
<PAGE>

ITEM 2. MANAGEMENT'S  DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
        OF OPERATIONS

No disclosure is required for this Item pursuant to General Instruction H of
Form 10-Q.  There are no material changes in the amount of revenue and expense
items between the most recent fiscal year-to-date period presented and the
corresponding year-to-date period in the preceding fiscal year.



ITEM 3.  QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK

No disclosure is required for this Item pursuant to General Instruction H of
Form 10-Q.



ITEM 4.  CONTROLS AND PROCEDURES

The persons who function as the equivalent of the chief executive officer and
chief financial officer of the Trust and the Partnership have evaluated the
effectiveness of the Trust's and the Partnership's disclosure controls and
procedures (as defined in Rule 13a-15(e) under the Securities Exchange Act of
1934) as of the end of the period covered by this Report. Based on that
evaluation, the persons who function as the equivalent of the chief executive
officer and chief financial officer of the Trust and the Partnership have
concluded that the Trust's and the Partnership's disclosure controls and
procedures are effective.

In addition, no change in the Trust's and the Partnership's internal control
over financial reporting (as defined in Rule 13a-15(f) under the Securities
Exchange Act of 1934) occurred during the first fiscal quarter of 2004 that
has materially affected, or is reasonably likely to materially affect, the
Trust's or the Partnership's internal control over financial reporting.





                                       12
<PAGE>



                           PART II - OTHER INFORMATION

ITEM 6.  EXHIBITS AND REPORTS ON FORM 8-K

(a)      Exhibits

         12   Computation of Ratios of Earnings to Combined Fixed Charges and
              Preferred Securities Distributions.

         31.1 Rule 13a - 14(a) Certification.

         31.2 Rule 13a - 14(a) Certification.

         32.1 Certification Pursuant to 18 U.S.C. Section 1350, as Adopted
              Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

         32.2 Certification Pursuant to 18 U.S.C. Section 1350, as Adopted
              Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.




(b)      Reports on Form 8-K

         None.



                                       13
<PAGE>





                                   SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrants have duly caused this report to be signed on their behalf by the
undersigned thereunto duly authorized.


                               MERRILL LYNCH PREFERRED CAPITAL TRUST III*

                               By: /s/ HAIG J. NARGESIAN
                                   ---------------------------------------------
                               Name:   Haig J. Nargesian
                               Title:  Regular Trustee


                               MERRILL LYNCH PREFERRED FUNDING III, L.P.*


                               By: MERRILL LYNCH & CO., INC., as General Partner

                               By: /s/ JOHN J. FOSINA
                                   ---------------------------------------------
                               Name:   John J. Fosina
                               Title:  Controller, Merrill Lynch & Co., Inc.



May 6, 2004
-----------

* There is no principal executive officer(s), principal financial officer,
controller, principal accounting officer or board of directors of the
Registrants. The Trustees of the Trust (which include the Regular Trustees, the
Property Trustee and the Delaware Trustee) together exercise all powers and
perform all functions with respect to the Trust.



                                       14
<PAGE>



                                INDEX TO EXHIBITS

EXHIBITS

12       Computation  of  Ratios of  Earnings  to  Combined  Fixed  Charges  and
         Preferred Securities Distributions.

31.1     Rule 13a - 14(a) Certification.

31.2     Rule 13a - 14(a) Certification.

32.1     Certification Pursuant to 18 U.S.C. Section 1350, as Adopted
         Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

32.2     Certification Pursuant to 18 U.S.C. Section 1350, as Adopted
         Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.




                                       15